Dealmaker’s Diary: This Christmas Present Could Double Your Returns

Alpesh Patel|December 19, 2024

I have an early Christmas present for you…

A way to double your returns on one of the world’s biggest stocks.

I’m talking about Amazon (AMZN).

But it’s not the Amazon you’re thinking of. While everyone’s focused on the online retail giant’s holiday shopping numbers and AWS results…

I’ve been using a less obvious strategy that’s delivered outsized gains for years.

It’s not for the faint of heart, but if you understand the timing and risks, this approach could turn a 70% gain into 140%.

The key is knowing exactly when to enter and exit… and fresh off the Dow dropping 1,000 points, I’m seeing an interesting setup forming.

Want to know my secret weapon for maximizing Amazon’s potential?

Let me show you how I’ve been playing this tech giant differently than most.

This the kind of research my clients pay thousands for… but you get it for FREE as a Total Wealth subscriber.

Click on the image below to dive in.

TRANSCRIPT

Merry Christmas, everyone. I have an unusual, very Christmas-themed stock for you.

Here’s the grand reveal. You’re going to think I’m a little bit crazy, but let me explain.

Amazon (AMZN).

“Wait a minute, Alpesh. We don’t pay you the big bucks to come up with Amazon!”

Well, actually, there’s two versions of Amazon.

There’s the underlying stock, and I’ll go through the numbers.

Of course it’s very Christmas-themed… because guess where my presents are coming from this year? Yes, I’m afraid it’s going to be left to the last minute.

I had dinner the other day with a friend of ours who works with AWS, Amazon Web Services, on the political side.

Nothing confidential to disclose… but just consider the size and scale of the company.

But it’s not that. It’s not the obvious thing.

It’s a slightly less obvious thing. After recent market falls – and I’m recording this after the Dow just dropped a thousand points – you want companies which are more likely to rebound quicker, not fall too far, have strong fundamentals.

But here’s the kicker: I’m looking at the Direxion Daily AMZN Bull 2X Shares (AMZU).

In other words, if the stock goes up 10%, I make 20%. If it goes up 30%, I make 60%.

Of course, it’s not as simple as that. Leverage is risky, always risky.

If it drops 10%, I lose 20%. If it drops 20%, I lose 40%.

However, I don’t like buying these things in a falling market. The market’s just fallen, so I’m not going to do it on a down day. I wait until there’s an up day and a bit more stability.

That’s a tool I’ve been using, the 2x leverage Amazon, for quite a number of years to make outsized gains.

Why outsized gains? Well, the stock itself is solid. With the leverage version, I can make double.

If it goes sideways, you can have what’s called decay.

The thing about Amazon is it tends not to go sideways.

Let’s have a look at a deeper dive into the company itself.

AWS cloud computing is where it’s at. I know I mentioned Christmas and that theme, but actually, it’s in the cloud -where Santa Claus is going to come from.

It’s that part, the AI part, not the shop that we all think about. (Although that is important.)

By the way, here’s another kicker about Amazon… Amazon receives more in ad spend than Google does.

People think “Google search engine.”

Amazon’s more of a search engine. People pay to advertise on Amazon.

They spend more. Why? Because they get a better return on investment than they do on Google.

Let’s look at some numbers as to why any falls would bounce back quickly, let alone the upside growth, and why the 2x leverage ETF is the one I’m looking at.

I don’t think I’ve ever told any of you this. It’s been rather good for me over the last few years. Although in 2022, I wasn’t in the 2x ETF. I was holding cash most of that year.

Onto the numbers…

On my proprietary Growth-Value-Income rating: 7.

Forecast P/E: 45, which actually for a high-growth company, but isn’t too bad.

Cash return on capital invested: 9.6%. I would have preferred it to be just above 10%, but 9.6% is pretty good.

Sortino ratio: 0.28. Not bad in terms of average return versus downside risk.

Volatility below 20%. That’s low volatility. That’s what we want, because volatility increases when the market’s overbought as it is now.

And if there’s going to be a flight to safety, it’ll be this.

Look at 2022.

We had to hold cash then, and that’s fine. During that period, the stock dropped from $190 to $84, basically going down 50%.

You do not want to be holding 2x leverage when that happens. You don’t even really want it when it goes down 20%.

However, here’s the bullish case: 70% up over 12 months.

That’s the bullish case. Would that mean you make a 140% return? Yes, if it went up straight, roughly.

I wouldn’t be getting into 2 times leverage when the market’s falling. I won’t be getting in when Amazon’s falling. I’d be waiting to see how things pan out.

Yes, it is overbought.

However, on discount cash flow, it’s considered undervalued. It’s supposed to be closer to $315. That would be getting it to those levels.

Pretty attractive.

Flight to safety? Well, even in 2022, that’s its worst fall.

But we have to be careful. We have to know those risks and make sure, as always, risk appetite suits our pocket.

However, Amazon’s been the gift that Santa Claus kept giving, not just at Christmas but all year round for the last few years, with the exception of 2022.

So, yes, I’ve now told you one of my secrets. Merry Christmas. My present to you.